The Danish Business Taxation Scheme or Limited Liability Company: - an Analysis of the Company Law and Tax Differences Affecting the Choice of Business Form

Kristina Spurr Nielsen

Student thesis: Master thesis


Every year a lot of new entrepreneurs choose to start enterprises, and they will therefore be faced with the choice of with type of business to choose. To make this decision, the entrepreneur needs to know the different types of enterprises and which company-laws and tax-laws there applies to the individual enterprises. This thesis will focus on 2 specific types, limited liability company ans proprietorship in The Danish Business Taxation Scheme. Company-law is much easier in proprietorship rather than in corporate form, because limited liability companies are subject to a lot more company-laws then proprietorship. Proprietorship are not subject to the same legislation, which makes it easier for both the regulatory, but also the administrative purposes. Proprietorship is not an independent tax subject and must therefore be included in the taxable income of the owner. There are clear rules about how The Danish Business Taxation Scheme is to be applied and what it can be used for. The Danish Business Scheme has been introduced to equate Proprietors with limited liability companies. The business scheme is a complex tax-based scheme and there are many tax concepts and statements that the owner must be able to understand and calculate to apply The Danish Business Taxation Scheme. The purpose of The Danish Business Scheme, was to equate Proprietors with limited liability companies, even though are there some tax-law and company-law differences. Among one other things, has The Danish Business Scheme since its introductions in 1987, been possible to achieve a benefit of tax savings by including the owner’s personal debt in the company scheme. To stop this practice and prevent unintentional application of The Danish Business Scheme, a new law was adopted in 2014, Law No. 992 of 16/09/2014. The main differences between Proprietors and limited liability companies are the requirement of legal capital, how the owner is liable for the company, the processing of deficits from the company, and the treatment of transactions between the company and the owner. It is therefore this thesis purpose to provide an overview and understanding of the differences between limited liability company and proprietorship. However, is it important to point out that the thesis doesn’t provide a clear guideline. The choice of business form may vary, depending on the type of business and the owner's other taxes or individually circumstances. However, the thesis will illuminate the differences and bring advantages and disadvantages to each business form and thereby try to create an overall conclusion.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2017
Number of pages87